Never Use Zillow.com to Comp Properties and Here’s Why
I will cut straight to the chase on why you should never use Zillow.com, PropertyValues.com or any other online property comping tool. You only want to use the multiple listing service (MLS) which is what Realtors have access too and use to comp properties.
First, understand that to “comp” means to run a property comparable, to take the house you feel is a good wholesale or bird dog deal and determine a value on it according sales on houses similar to it.
The reason is this, every other online comping services only use a radius or radial search of properties. Radius means circle, so from your subject house you are trying to get a true value on, services like Zillow’s software draws a circle around your house.
The circle can encompasses areas from 1/2 to 1, or 2 miles to greater. With your house in the center of the circle.
This is all well and good except the search brings up houses which are not all in your subdivision. It encompasses other subdivisions say across a major street. Making it impossible to compare apples to apples.
The MLS can do a radius search and most importantly can do a search by subdivision only which is what you need. Subdivision searches brings up houses that are built by the same builder, in the same era, with the same housing products available at that time. Also with similar floor plans and layouts.
The lots of land are similar in size, landscaping, and appearance, grade, and location. By location meaning in a certain plot of land, whereas across that same major street the houses are built on land differently, the land had a different grade, street plan. It could have better or less than better landscaping in its commons areas.
The house across the street could be near a nice park or a pig farm making it more or less than desirable. And because you as a real estate investor do not want to get up from your chair and run across town to determine if this is a good deal or not you need to know how to run solid comps. Thus saving your precious time.
Disclaimer. If your eager to learn investing but do not have MLS access, Zillow is better than nothing. It can help you to understand the principals and theory behind the complexity of comping your wholesale birddog deals. It is how I began, until I realized differently.
The MLS is the only software of its kind that offers the subdivision search only making it the premier comping tool. With that said how do you go about getting access to the MLS so you can run comparables, then how do you run comps that are solid once you have the software, well that is another article or e-book in its self.
Filed in Investors 4 Comments so far
Are Online Real Estate Comps A Load of Crap? on 02 Sep 2008 at 5:12 am #
[...] My Zillow Google Alert turned up this post: Never use Zillow.com to Comp Properties and Here’s Why. [...]
David G from Zillow.com on 02 Sep 2008 at 3:51 pm #
Hi, it’s David G from Zillow,
That “subdivision” feature is really cool but your critique of Zillow is not really accurate. Just to clarify, the Zillow comps algorithm does not just pull a list of recent sales in a set radius but rather it attempts to select nearby homes that have recently sold and that are similar to the home in question. It’s important to remember that the list on Zillow is a list of *suggested* possible comps that is intended to be paired down by the user and so, we cast a wide net and let the user select the most relevant comps from the suggested list and so, you should certainly expect some of the homes in Zillow’s list of possible comps to be poor comparables.
I think that it is a very cool feature that some MLS’ allow agents to only pull recent sales within a sub-division at the click of a button. I also agree that this is important when dealing with spec-homes in housing tracts. There is no such a button on Zillow but you can actually do exactly the same thing by filtering the list of Zillow’s comps using the map of comps Zillow provides. It may take a few more clicks but there is not a huge difference between approaches.
Regardless of the system you have access to, you should probably never rely on an algorithm alone to pick your comps for you. Using Zillow, users can search and filter all of the recent sales for a detailed online comps analysis that bypasses the recommended comps list. Frankly, this is the most thorough approach and the one I would expect many pro’s to take.
Bill Guerra on 06 Sep 2008 at 10:02 pm #
Hello David G. of Zillow, this is Bill Guerra of http://www.willbuyanyhouse.com/news ,
I am responding to your comment, on our blog above, where the article I wrote titled “Never Use Zillow.com To Comp Properties, Here’s Why” is parked.
Thank you for the reply it provides great discussion for inquiring minds. You had mentioned about the Zillow and its ability to comp. My article really did cover most of this.
Zillow does not have the ability to comp in subdivisions only, nor does it have the capability to see whats listed for sale in the subdivision. Both are very critical when you are writing the check/cash for say $100-$200,000 dollars to buy a house and close in 3-5 business days.
In this instance an individual or investor needs the best software money can buy, wouldn’t you agree? The proprietary software I am talking about is the multiple listing service (MLS) which the Realtors use.
Also it’s critical to see what houses are available for sale in a subdivision or area here is why. Say you have a house you want to comp (this is called running a comparable market analysis)on, yet there are 15 others on the market for sale in that subdivision. You must take that into consideration in making a buying decision because your subject houses’ value just plummeted.
The reverse is true to, if you know that three is no other houses like yours available in the subdivision then you can increase your price.
These are a few reasons why you need the MLS to seriously comp properties. That said, for a new investor trying to wrap their minds around running comps, or homeowners who want to get a gross ideal of what there place is worth, Zillow is just in fine. There is a place in the world for everything!
Debbie P on 18 Sep 2008 at 5:08 pm #
Debbie P…
I guess I missed that one! I need to look into this more……